FORT MORGAN — Hundreds of workers on rotating shifts continued to gather outside the Cargill meatpacking facility in Fort Morgan on Tuesday, waving signs that read “The Steaks Are High” seven days after the largest privately owned company in the United States locked them out.
But the vibe in the crowd outside the fenced facility was jovial, as songs in different languages blared from a Teamsters Local 455 union truck. Organizers shook hands, patted backs and handed out more signs. Big rigs blasted their air horns, and a group of Haitian workers boogied to their own music blaring from a boombox.
During an interview Friday, Brent Nation, Fort Morgan city manager, said it was hard to know what to call the labor action that’s been unfolding behind the Cargill plant since May 20.
“Is it a strike or not a strike?” he asked from his office on Main Street. “Cargill locked the workers out, so it’s technically not a strike. But they’re carrying picket signs and acting as though it’s a strike. So I refer to it as a strike.”
Cargill officials say they barred the doors because a contract dispute ongoing since February could have resulted in a worker walkout that would have jeopardized food safety, animal welfare and millions of pounds of beef cut from the 2,500 cattle they process there daily.
But the Teamsters Local 455 union, which represents Cargill workers, says Cargill stopped bringing cattle to the facility just days after a “pretty contentious day of negotiations” on April 20. And while at first, they only said they were reducing inventory, said Chris Suazo, a Local 455 business agent based inside the Cargill facility, “a week or a week and a half later, it was because they were threatened with a strike and they stated (it was for) safety.”
Cargill paid the 1,700 workers who turn cattle into flank steaks, sirloins, T-bones and other cuts while they were off the job and Cargill negotiated a new contract with the union starting around four weeks ago. But talks disintegrated at midnight May 20 after 90% of union workers rejected Cargill’s latest offer representing an estimated $33.4 million pay increase over five years “designed to provide stability and predictable wage increases,” according to the company.
Cargill says the beef giant worked with the union to schedule additional bargaining. That meeting is set for Wednesday.
But when a company the size of Cargill closes its doors for any amount of time, the impact extends far beyond its employees. And according to an agriculture expert at Colorado State University, while some may suffer, Cargill’s closure could beef up revenue.
WORKER IMPACT
Suazo said one reason the picket scene might have seemed lighthearted was because workers continued to be paid, by the union, in a more reliable manner than they sometimes are at Cargill.
That’s because the company guarantees a 36-hour work week, but 10 times a year, at Cargill’s choosing, the company can cap the work week at 32 hours, he added, “and even though they only have 10 of those, if they line three of them up in a row, that’s a big impact to workers that aren’t at the upper end of the pay scale.”
By contrast, the union workers are making $1,250 a week, paid for by the Local 455 and the International Brotherhood of Teamsters, Suazo said. The reason that number is so high is because the union asked the International Brotherhood for “enhanced strike benefits” that exceed standard strike pay to help workers cover expenses while withholding labor during a strike. Teamsters Local 455 Treasurer Dean Modecker said Tuesday “there’s no cutoff date the union can see at this point.” That’s a pretty good deal when union monthly dues are just two and a half times a worker’s base hourly wage rate, according to Suazo.
Members can also go to the bathroom whenever they want, unlike when they’re working on the production line inside Cargill, where employees are directed to “notify a supervisor and wait briefly for coverage before leaving their workstation,” according to Cargill policy. Bathroom breaks were a key point in the union’s negotiations amid allegations of multiple employees wetting their pants because “they’re either being retaliated against, or threatened or are too scared to ask to go,” Suazo said.
Cargill’s policy says an employee can use the restroom “if the need is urgent,” even when a supervisor is not available, and that employees aren’t disciplined for following this process.
The only problem with bathroom breaks on the picket line is that there aren’t any portable toilets, which the union initially assumed was being blocked by the Fort Morgan Chamber of Commerce, upset over the labor dispute.
But Nation said the chamber has never controlled who gets portable toilets, and the reason the union couldn’t put them on the lot they wanted was because “it is not a public-facing facility.”
The town wouldn’t have placed them anyway, “because we didn’t want to look like we were siding either with Cargill or the Teamsters,” he added.
FORT MORGAN IMPACT
Nation said there are two types of impacts the town is already “sensing” after Cargill stopped bringing cattle to the slaughterhouse in April.
Both impacts hit the town’s pocketbook deep. Cargill is Fort Morgan’s largest water and electricity user, and the town also heavily relies on the sales tax the company and its 1,700 workers pay within the town limits.
Nation said he won’t know sales tax revenue losses from the lockout until data is calculated in early July. But the town is anticipating a big hit in the amount of utility payments collected from Cargill, which typically uses around 2 million gallons of city-owned water per day and about a third of all of the city’s electricity usage during summer.
“So we’re not selling them water and we’re not selling them electricity, or we’re selling very little of both of those commodities,” he said. “And we have a lot of fixed costs in those utilities,” including employee pay, vehicles and infrastructure, “that we anticipate (paying for) with the income coming back to us.”
BEEF INDUSTRY IMPACT
According to the Federal Reserve Bank of St. Louis, beef prices have skyrocketed due to low cattle supply, high demand and things like evolving tariffs and disease.
And when it comes to beef production, “any disruption and any impact on prices is going to take some time (to see) because of the way the industry is structured, which creates a bit of a buffer for many supply chain shocks,” said Jennifer Martin, quality and meat extension specialist at Colorado State University.
“Supply chain pressures usually are felt downstream. Not too dissimilar from when oil prices go up, we don’t automatically see an increase in the price of our popcorn or potato chips,” she added.
“So it takes some time for that to reach the consumer, but there’s another piece. Beef processors themselves have been losing money for some time now, because the capital costs, like the overhead costs of operating a plant, the labor, transportation, etc., have gone up while amount of animals coming into a plant have gone down.”
Such is the case with most beef production facilities, including Cargill, she said.
The Fort Morgan plant has the capacity to process more than 4,500 head of cattle per day; prior to the shutdown it was processing 2,500.
And while historically, the plant has had the capacity to process 5,000 to 6,000 head, Martin said, Cargill has been operating “well under that for some time, because there just aren’t enough cattle going into the supply chain.” Thank things like drought, Mexican imports shutdown linked to New World screwworm and other trade uncertainties, says Sarah Little, vice president of communications for the North American Meat Institute.
But here’s the catch: American demand for beef is at an all-time high, so what cattle America does have is incredibly expensive. And that means every day that a plant is processing these pricey cows at less than capacity, it is almost guaranteed to be losing money, Martin said.
That might cripple some businesses, but a giant corporation like Cargill has multiple plants in close proximity, including one in Dodge City, Kansas.
CARGILL IMPACT
“It seems counterintuitive,” Martin said, but here’s how Cargill ceasing operations and locking out workers could actually improve its bottom line.
Beef processing plants across the country are “hungry because there’s such low cattle supply,” she said, and most have been operating under capacity.
“So if the Fort Morgan plant has been operating at 75% capacity” and Cargill’s other plants are operating below capacity, if Cargill sends its Fort Morgan cattle to its other plants, that new influx of cattle allows those other plants to operate nearer to capacity, she added.
“Or let’s just keep it simple. If my cost of operating a packing plant is $1,000 and I’ve been harvesting 500 head for that $1,000, if I’m now able to harvest 1,000 head for that $1,000, that’s much less per head.”
But even if such and arrangement were to bring down the production cost per pound of beef, she said as long as transportation and fuel costs remain high, consumers shouldn’t expect to see it reflected in lower costs at their local supermarket.
Cargill says under current plans, it does not expect material impacts to producers or customers, and that it “remains committed to reaching an agreement through continued good-faith negotiations with the union, with the goal of returning the facility to normal operations safely and productively as soon as possible.”